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Wall Street Still Bullish on GOP Getting Tax Reform Done

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By Michael Rainey

November 16, 2017

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Goldman Sachs thinks that the odds of a GOP tax package being passed in the next few months are still high, despite recent complications including the addition of Obamacare mandate repeal to the proposed legislation and Sen. Ron Johnson’s (R-WI) statement Wednesday that he couldn’t vote for the bill in its current form due to concerns about its treatment of small businesses.

For some, the developments point to trouble ahead for the tax plan, but in a note to clients Thursday morning, Goldman economist Alec Phillips said the headlines haven’t changed the outlook for the bill: “We recently raised our subjective odds of enactment of tax reform to 80%, but developments since then have prompted questions as to whether the probability has decreased. We don’t think so.” The latest problems can be addressed through modifications in the bill, Phillips said, and there’s still good reason to think the tax package will gain enough Republican support in the end.

The investment banking firm Keefe, Bruyette & Woods echoed Goldman’s assessment in its own note to clients Wednesday morning: “We think Republicans will be able to modify this part of the bill enough to get Johnson back on board so we maintain our view that the prospects for some form of tax legislation passing are about 70-75%.” Analysts at the research firm Evercore ISI were similarly positive in the wake of the Obamacare mandate repeal announcement, according to Bloomberg, saying, “We keep our call unchanged that tax legislation is 75 per cent likely.”